Motherson Sumi Systems, one of India’s leading auto-parts makers, has outlined its five-year vision plan that encompasses a four-fold revenue growth, business de-risking strategy, higher auto business share and dividend payout.
By FY25, the company aims to grow its revenues to $36 billionwith 40 per cent ROCE (consolidated), from $8.9 billion in FY20. The second objective is that no country, customer or component should contribute more than 10 per cent to its revenues by FY25.
Supported by an inorganic strategy, the company aims to have 75 per cent of revenues from the automotive industry, while remaining 25 per cent is to come from new divisions. Its fourth objective is to distribute about 40 per cent of consolidated profit as dividend.
“We continue to build Motherson for the long-term. The launch of our sixth 5-year plan is a reflection of that commitment. Our 2025 plan will bring us new opportunities and take us to new heights,” Vivek Chaand Sehgal, Chairman, Motherson Sumi Systems Ltd, said in the company’s latest annual report.
The company said its practice of using five-year plans has helped it enormously in preparing for both storms and good weather. “Without our five-year plans, the company would probably have continued to grow at around 10-20 per cent a year and it would have made it a $270 million company in 2020. But in reality, it is an $8.9 billion company today,” it said.
Previous five-year plan
In its previous five-year (2015-2020) growth plan, the company planned to achieve revenues of $18 billion by March 31, 2020 in combination, with a target of 40 per cent ROCE.
However, it achieved consolidated sales of $8.9 billion for the period ended March 31, 2020. During 2015-20, it built 41 plants across geographies to meet the requirements of the customers.
“At the start of our fifth five-year plan (2015-2020), we had several acquisition opportunities that would have taken us straight towards $18 billion. However, we decided not to complete them. We believed they would not be optimal for us in the long run. We will work hard to make up for some of the problems caused by the pandemic in the next five-year plan,” said Sehgal.
The company, which has more than 270 facilities in 41 countries across five continents, had cash and bank balance of ₹4,873 crore as of March 31, 2020. Its net debt excluding additional lease liabilities recognised as per Ind AS 116 was ₹6,917 crore, significantly lower from ₹7,992 crore in FY19.
Sehgal stated that the pandemic had paused work, not stopped it. The company used this time to introspect, to ask deep questions about how it can improve itself and how to prepare better for the crisis like this. “We believe adaptability is a crucial trait to succeed in the long run,” he added.